In the long run,pure competition forces firms to produce at the minimum of average total cost and charge a price consistent with that cost.

Question

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In a perfectly competitive market, firms are price takers and must accept the market price. This forces them to produce at the minimum point of their average total cost curve in order to earn a normal profit. If they were to charge a higher price, they would not be able to sell their goods because consumers have other options. Similarly, if they were to charge a lower price, they would be unable to earn a profit. Therefore, in the long run, pure competition forces firms to produce at minimum cost and charge a price consistent with that cost.

In the Long Run,pure Competition Forces Firms to Produce at the Minimum